By Charles DuBose, BWE
The last decade has seen a lot of change in Virginia’s capital. Fortune 500 corporations like Amazon and Meta are building data centers nearby, Lego is opening its first-ever US manufacturing facility in suburban Chesterfield County, and the CoStar Group has established and is expanding its headquarters in Downtown Richmond. This booming economy has made Richmond Virginia’s fastest growing region – and investors have noticed. Across all property types, real estate developers and investors from across the nation are looking to Richmond as a prime target for new investment.
As a result, institutional sources of debt and equity from across the country are increasingly drawn to Richmond as they seek more reasonable valuations for their investments. Construction costs, high interest rates, and more aggressive valuations in cities such as New York, DC, Charlotte, and Raleigh have forced these sources to look outside of these markets, and Richmond has been a beneficiary. Richmond’s consistent job growth and desirable location in one of the best states for business have also helped the city retain and attract new capital.
Strong underlying market fundamentals (Richmond nets an average of 28 new residents every day) indicate that development in Richmond will continue to be a lucrative opportunity for investors from across the country. As the city grows and welcomes new residents, trendy neighborhoods outside of downtown like Manchester and Scott’s Addition have seen an influx of people drawn by the neighborhoods’ amenities and “live, work, play” environment. Landmark mixed-use developments like the Diamond District—which includes a new stadium being built for the city’s “AA” minor league baseball team—as well as GreenCity and Richmond’s City Center are also garnering significant attention and investment from out-of-market players.
The City of Richmond isn’t the only area of the market seeing new development – the suburbs have also experienced significant investment. High interest rates, aging residential units, and limited new supply have made the prospect of homeownership difficult for many, and as a result developers are jumping on a growing build-to-rent (BTR) trend. Several new BTR projects are underway in the Richmond suburbs, with demographic trends supporting demand for this type of housing.
Additionally, Richmond’s location at the center of the East Coast has made it a prime target for industrial developers. Asking rents for high-bay warehouses have risen by 17% over the last year, and major companies like Lowe’s and Walgreens, among others, have invested millions in the Richmond area.
Only a few years ago, a $25 million real estate investment in Richmond would have been newsworthy, but today, it is not uncommon to see $80-100 million deals. Rent growth in Richmond remains strong across property types, and world-class universities and a business-friendly environment continue to attract new companies and residents from across the East Coast. As we look toward 2024 and beyond, expect Richmond to remain a thriving market for real estate investment and development.
Charles DuBose is a senior vice president at BWE, a national commercial and multifamily mortgage banking company.